NEW YORK (AP) -- When the Trump administration ends its tax exemption for low-value exemptions for imports from China, consumers can expect higher prices and delivery delays.
The expiration of the so-called De Minimis rule, which allows up to 4 million low-value packages to enter the U.S. (mainly from China) every day, also forces companies to build models of their procurement production in China to rethink their practices in order to keep their costs down.
But some people may actually benefit from termination of taxes. For example, companies that make goods in the United States may feel relieved from competition for cheap Chinese imports and may experience brighter sales prospects.
The move applies to goods originating from mainland China and Hong Kong, with President Donald Trump reaching 145% new tariffs in China. Beijing retaliated against U.S. tariffs, which exacerbated the trade war between the world's two largest economies. Sellers have seen cautious consumers.
On Wednesday, Trump called the De Minimis immunity “a big scam against our country, against real small businesses.”
"We're over it," he said.
What are the regulations of De Minimis?
The De Minimis exception was launched in 1938 and aims to promote the flow of small packaging worth no more than $5, the equivalent of $109 today. The threshold rose to $800 in 2016. But the rapid rise in cross-border e-commerce driven by China has challenged the intent of decades-old custom exception rules.
According to a February report by the Congressional Research Services Agency, China's exports of low-value packages reached $66 billion in 2023, up from $5.3 billion in 2018. The U.S. market has always been a major destination.
Former President Joe Biden proposed a rule last year that foreign companies cannot avoid tariffs simply by shipping goods, which they claim are worth $800 or less. Trump tried to end the exception in February, but his initial order was cancelled within a few days, when the United States was not ready to process and collect tariffs to collect tariffs on large amounts of parcels.
What is the impact on shoppers?
Now, consumers will face higher prices and delivery delays as parcels will enter the United States involving declarations and taxes through a more complex customs process.
Businesses can include tariffs in their final price, or they can list them separately in the same way as sales taxes. Temu, owned by Chinese e-commerce company PDD Holdings, for example, now lists "import fees" that have been reportedly doubled. (Retailers also offer a "local warehouse" option for certain products that are shipped from within the United States, thus avoiding import fees.)
Meanwhile, Shein is now located in Singapore and has a checkout banner that says: "The price you pay includes tariffs. You never have to pay extra fees when delivering."
Amazon said it does not intend to show increased tariff charges next to the price of products on its website - despite reports sparking speculation that e-commerce giants will soon show new import fees, while the White House issued a fierce comment denouncing the alleged change.
What about the seller and the carrier?
Ram Ben Tzion of the review platform Publican said parcel carriers will be responsible for the collection, and paperwork that complies with the new rules may not only lead to higher prices, but may also lead to delays and even disrupt delivery.
Major commercial airlines such as UPS and FedEx said they are fully equipped and ready to collect international parcels responsibilities in accordance with local laws, including new U.S. rules.
Commercial carriers will charge 145% tariffs at the announced value. The U.S. Postal Service, a government agency that offers international mail services, can choose to charge a 120% tariff on low-value packages or a fixed fee of $100 per van, which is scheduled to rise to $200 on June 1.
The U.S. Customs and Border Protection said, “It is prepared to fully implement restrictions on minimum goods and collect all revenue from these goods on May 2, 2025.”
However, experts say concerns that a surge in workload could be a serious challenge.
According to CBP, 70% of the 216 million packages entering the United States came from China in January and February.
What impact will it have on the company?
Those who rely on the minimum exemption must now make adjustments.
John Curry, owner and CEO of Arizona-based swimwear business Hapari International, has moved from bulk shipping to De Minimis shipping about six months ago to improve cash flow, speed up delivery and ultimately eliminate warehouses in the U.S. His company produces products in China and sells them directly to U.S. customers through its online storefront.
Curry said he plans to stay on the course and pay an additional 145% tax (one package at a time) as he waits for the U.S. and China to take a more sustainable approach.
"There has to be a solution because neither of these countries can survive this way," Curry said.
Izzy Rosenzweig, founder and CEO of Logistic Company Fortless, helps companies like Hapari ship goods from their Chinese warehouses through a De Minimis waiver. Given the competitiveness of manufacturing bases and China's supply chains, U.S. companies may now stay in China, but can raise prices, he said.
He said that while businesses with good margins may continue shipping from China, those running at razor margins are likely to “go local” and build more U.S.-based warehouses to pay for tariffs.
Who benefits?
Trade groups representing flag manufacturers and bicycle dealers said they are expected to benefit from the end of the exemption tax.
For example, in a written comment on the U.S. Trade Representative’s portal, the American Flag Manufacturers Association said its members were attacked by most people in China’s imports of U.S. flags made in China, mostly in China, which were falsely sold and discounted. The group last year listed 25% to 35% of American flags made in the United States.
Larry Severini, CEO of Embroidery Solutions Manufacturing LLC, made star fields for American flag manufacturers, and had to close one of his two factories earlier this year at two South Carolina plants due to fierce competition for cheap imports. He noted that sales have fallen by 20% since 2021, partly due to a minimum exemption.
"We need responsibility to keep the game environment fair," Severini said.
Heather Mason of the National Bike Dealers Association said shoppers often view $2,000 bikes from trusted brands like Trek, and then they find a similar bike online for $1,200 — often with lower quality parts, no warranty, no service and safety risks.
"Reputable brands follow strict safety, labor and warranty standards," she said in an email to the Associated Press. "De Minimis allows bad actors to evade these."
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Don reported from Washington.